Netflix’s password-sharing crackdown hits the US

The streaming platform says only one household can watch per account.

Arnold Schwarzenegger and Fortune Feimster attend the Netflix premiere of ‘FUBAR’ recently in Los Angeles, California. Picture: Tommaso Boddi/Getty Images

Netflix’s crackdown on password sharing has arrived.

The streaming company is sending emails to users in the US and more than 100 countries and territories Tuesday saying only one household can watch Netflix per account, meaning those who live outside of their four walls will soon be cut off.

Users could start seeing such prompts the next time they log in. In the US, those who want to share an account outside their home have to pay an additional $US7.99 ($A12.09) a month, Netflix said, a price tag that is $US2 less a month than a basic Netflix account. It is $US1 more a month than a Netflix account that plays ads.

The company, facing slower growth, has been warning investors and customers since last year that it planned to crack down on shared passwords in early 2023. More than 100 million Netflix viewers watch the service using borrowed passwords, the company said.

The change is likely to up-end years long password sharing arrangements in and between families, friends and households around the globe. For Netflix, the move is critical to its growth: The streaming giant and its rivals are struggling to bring in new subscribers, particularly in the US market, where consumers can choose from a range of services that are easy to turn on and off.

The sharing limits Netflix rolled out Tuesday span all regions of the globe, from the US and UK to Israel, Germany, France, Norway, Australia, Hong Kong, Singapore, Mexico and Brazil.

Netflix said prompts on a user’s device the next time that person logs in will ask them to identify the account’s primary household, a preference they can update in the future.

The company will detect whether a viewer is part of that household based on the devices like smartphones or iPads that are connected to the same internet network as a primary TV, according to Netflix’s help page.

Netflix said everyone living in the primary household can use the account “at home, on the go, on holiday.” Customers with a second home, or who travel to the same location often, must connect to the internet at the primary household attached to the Netflix account and open the app on their mobile devices once a month to maintain access when they move to the second location.

The sharing changes come with some limits, including how many extra members account owners can add. Primary account owners in the US who pay for Netflix’s $US15.49 a month standard plans will be able to add one extra member outside of their household, while customers on Netflix’s $US19.99 premium plan will be able to pay for a maximum of two extra members. They must buy an extra member slot and invite the extra person.

Netflix late last year created a global feature that lets viewers transfer viewing profiles to new accounts. This was an early step in its efforts to limit password sharing by making it easier for sharers to shift their preferences to their own account. Primary account owners have to allow such transfers.

The change marks a reversal for Netflix, which once tweeted, “Love is sharing a password.” “Make no mistake, I don’t think consumers are going to love it right out of the gate,” Netflix co-chief executive Ted Sarandos told investors in December.

Shares dropped 1.9 per cent on Tuesday.

Netflix has already announced similar crackdowns in Canada, Spain, Portugal and New Zealand, as well as in Peru, Chile and Costa Rica.

The company is in the throes of two major and related strategic shifts: password-sharing crackdowns and a relatively new advertising model. In limiting password sharing, it hopes to drive more viewers who were using someone else’s account to pay for their own subscriptions.

Late last year, Netflix launched its $US6.99 ad-supported tier of service in the US and several other countries that offers consumers a lower price in exchange for viewing ads. Those customers deliver more revenue per member than its basic and standard plans, because Netflix makes money from the ads as well as the monthly subscription fee.

Customers in countries where it first limited account-sharing initially baulked at its campaign, but many ultimately paid for their own accounts in order to watch hit content, the company has said.

In Canada, for example, Netflix’s paid membership base was larger after its password-sharing limits were rolled out than they were before it, and revenue is growing there faster than in the US, Netflix said in an April shareholder letter.

Netflix rolled out the password-sharing changes as it aims to cut $US300m in spending this year in a push to improve profitability.

-Sabela Ojea contributed to this article.

The Wall Street Journalchi